Support for flexible penalties ‘sign of SMSF industry maturity’
19 February 2014: The SMSF industry’s support for a Government measure to introduce more flexible penalties for trustees who breach the rules demonstrates the maturity, integrity and professionalism of the sector, says AMP SMSF, Head of Policy & Technical, Peter Burgess.
Addressing the 10th SMSF Professionals’ Association of Australia national conference in Brisbane today, Burgess says: “Under the current rules, where the Australian Taxation Office (ATO) imposes penalties on trustees, it can have severe implications for the fund.
“In these circumstances it is understandable why the ATO only imposes penalties in the most severe circumstances.
“The proposed new penalties, introduced into Parliament last year but now being re-introduced, will enable the ATO to impose penalties more appropriate to the seriousness of the offence.”
But Burgess adds there is more work that could be done as one of the “most severe and inflexible” SMSF penalties still remains – the penalties that apply if an SMSF fail the residency rules.
“The loss of compliance status in these circumstances is significant particularly when you consider the active member test is a difficult test to understand and apply and many breaches are inadvertent.
“Hopefully during the financial sector review this year the SMSF industry will have the opportunity to push for a more flexible penalty regime in this area.”
He says although the level of professionalism in the industry is on the rise, in some micro areas there is still room for improvement.
“As a result of the ATO’S final ruling on when a pension begins and ceases, a more disciplined approach to pensions, particularly in relation to when a pension starts and when a partial commutation request is received, is needed.
“In the past, in some instances, the industry may have been a bit blasé about pension start dates and clients making partial communication elections. However, going forward, and particularly in light of the pension ruling, we can expect the ATO to be taking a closely look at these issues,” Burgess says.
The SMSF Professionals’ Association of Australia (SPAA) is the authoritative voice for the self-managed superannuation fund (SMSF) sector. SPAA, which represents professionals providing a range of services across various disciplines in the complex area of SMSFs, is an advocate for the highest professional standards and competence to ensure SMSF trustees always receive the best possible advice.